Lets have a look at GLD today. The price has been moving up since the beginning of the year. There's a trend channel we can draw. It's not too hard to notice that the price since mid Feb has been spending time around and above the upper overbought supply line). This gives us two sets of information. One, that demand is stronger, and two, that we better stay alert as the string might be overextended. We also notice that the price lows stay clear of the mid and stay above it. I was even tempted to think perhaps the stride had changed so much as to consider the dotted trend channel with some extra importance, that is, before the unfolding of the price behaviour last week.
Last week price dropped, without a pit stop at the mid, all the way down to the low of the TC. The fact that demand was overwhelmed by supply, as evident from the higher volume during this drop, suggests that perhaps the nature of the might might put to the question. It's the first time price has not been able to resist the down push and instead of a courageous fight simply couldn't handle the pressure. This is also one day when price reaches the mid where the volume is significantly lower. On this day even lower supply is able to push the price down, and demand doesn't even turn up for some kind of a fight. This means the buyers were not much interested and they let the poor sellers lower their price without showing much interest in buying. A sign of weakness some say?
This drop to the lower TC doesn't mean the trend is over, yet, but has only given the first hint that the strength isn't the same as before. As we can see the dotted demand line has been breached. The breach was pronounced and then there's the complexity of having a hinge also in the foray. Price breaks out above the hinge. The break out fails. Price drops through the hinge and has a break down, obviously, to the downside. Is this break down the real deal or another fake out? As can be said almost always: Anything can happen.
What we do now is see how price reacts after this drop. Is it going to show strength and move up with aplomb, or is it going to act sickly and have trouble around the apex of the hinge? Will price go all the way up to the top and beyond or turn somewhere in between? Will it rest? Oh, there are so many possibilities and the fun has just started.
Gringo
